USMCA Goods May Remain Exempt From 35% Canada Tariff on Aug. 1, Trump Says

“We’re going to see,” he reportedly told an ABC News reporter that asked if USMCA goods still would be exempt. “When it was set yesterday, they called. I think it was fairly well received. It's what we need, so we'll see what happens."

An unnamed White House official reportedly had told The Wall Street Journal on July 10 that the USMCA exemption would still apply under the 35% tariff, but stressed that could change.

The USMCA exemption applies to tariffs imposed on Canada to address fentanyl trafficking, indicating that the 35% rate would be an increase to the fentanyl tariff, rather than new reciprocal tariffs, from which Canada is currently exempt.

Nearly 60% of imports from Canada entered under USMCA in May, up from about 33% in February, before the Canada tariff took effect, according to statistics from the International Trade Commission’s DataWeb.

The Canada tariff announcement came by way of a letter to Canadian Prime Minister Mark Carney posted by Trump to social media July 10. “Starting August 1, 2025, we will charge Canada a Tariff of 35% on Canadian products sent into the United States, separate from all Sectoral Tariffs,” the letter said.

“Goods transshipped to evade this higher Tariff will be subject to that higher Tariff,” the letter continued.

The letter mentioned not only concerns about fentanyl, but also trade deficits and barriers that have been the basis of reciprocal tariffs imposed on other countries.

“Also, I must mention that the flow of Fentanyl is hardly the only challenge we have with Canada, which has many Tariff, and Non-Tariff, Policies and Trade Barriers, which cause unsustainable Trade Deficits against the United States,” Trump’s letter said, specifically calling out the Canadian dairy tariff-rate quota that the president has repeatedly mentioned in the past.

It said tariffs “may be modified, upward or downward, depending on our relationship with your Country.” If Canada retaliates, the U.S. tariff will increase by the same amount as the Canadian retaliatory tariff, the letter said.

Trump said that “there will be no Tariff if Canada, or companies within your Country, decide to build or manufacture product within the United States.” He also said the U.S. “may consider an adjustment” to the tariff if Canada “works with me to stop the flow of fentanyl.”

Prime Minister Carney responded on social media late at night July 10: “Throughout the current trade negotiations with the United States, the Canadian government has steadfastly defended our workers and businesses. We will continue to do so as we work towards the revised deadline of August 1.

“Canada has made vital progress to stop the scourge of fentanyl in North America. We are committed to continuing to work with the United States to save lives and protect communities in both our countries,” Carney said.

Speaking the following day at an event hosted by the Washington International Trade Association, former Office of the U.S. Trade Representative official and current Asia Society Vice President Wendy Cutler called the announcement “quite a surprise.”

“Frankly, it’s not been a good week for Canada,” she said, noting that Trump also announced 50% copper tariffs and that Canada is the second-largest copper supplier to the U.S.

“This doesn’t bode well, in my view, for the USMCA negotiations,” she said. “And part of me thinks that, you know, maybe we won’t even have a USMCA” by the time a review of the trade agreement is supposed to happen in July 2026.

“I don’t say that lightly. I’m not hoping for that. But, you know, given how antagonistic and provocative we are being vis-à-vis Canada, it certainly suggests to me that we’re going to have some rocky times ahead with both of our neighbors,” Cutler said.

“Mexico right now is in a good spot, but we’ll see how long that continues, as well.”